Royalty-free licensing may benefit Google while putting others at a disadvantage
26Mar13

Several domain names registered last week offer further hints that Google may be planning to offer its patents for licensing on a royalty-free basis. The registration of openpatentpledge.com, openpatentpledge.net, openpatentpledge.org and opnpledge.com by the US company follows its call for comments on a variety of types of defensive licence, as reported by IAM earlier this month.

Of course, companies frequently secure domain names that, for whatever reason, they do not end up using, so it remains to be seen whether Google will adopt one – or a combination, or none – of the four defensive licences it highlights on its ‘Royalty-Free Patent Licensing’ website. Furthermore, we don’t yet know if Google plans to offer all, or just some, of its patents under any of these licences, should it implement them. These decisions are likely depend in part on the responses the company gets during the comment period it has set, which ends on 9th April.

When Google completed its acquisition of Motorola Mobility last May, it also inherited litigation that the handset manufacturer had initiated regarding its extensive portfolio of standards-essential patents (SEPs). This includes a case against Microsoft in the Western District of Washington, in which the court is expected to decide on a framework for the setting of FRAND royalty rates.

If Google does eventually offer some or all of its SEPs under any of the defensive licences it has outlined, would the terms of those licences fulfil FRAND obligations? The royalty-free element might appear to meet FRAND requirements to some extent – at least from the licensor’s perspective, as potential licensees would not be able to accuse them of setting prices too high. But is it really fair, reasonable and non-discriminatory to only offer your patents on a royalty-free basis if your prospective licensees do the same? Companies seeking to incorporate Motorola’s standards-essential technologies into their own products and services might have a lot more to lose than Google thinks it does by offering their own patented technologies – whether standards-essential or not – on the same basis. Nokia, for one, has stated that it has no interest in licensing its own video codec-related SEPs royalty-free as Google pushes ahead with its development of the VP8 video codec standard.

For many smaller, earlier-stage businesses, too, patents can be among their most important strategic assets. While access to the SEPs of a market incumbent would assist such a company in being able to compete with larger participants, licensing its own patents royalty-free would reduce any monetisation potential they possess – thereby making them, and the company that owns them, less attractive to existing and potential investors. Google’s defensive licensing proposals may gain accolades and improve its image among those who are generally critical of the patent system – but they are certainly not in the interest of all patent owners.